Economics 9708/41 — October/November 2018

Sustainable electricity

The UK government favoured the production of cheap, sustainable electricity and subsidised the large companies that operate wind farms. The wind farms cost a lot to build and maintain. However, as the wind is free, the companies pay nothing for fuel and can sell electricity at very low prices – when the wind is blowing. This destroys any incentive to build power stations that combine the use of wind and gas because when the wind blows the gas unit is switched off and the return on the investment in gas is zero or negative. This has meant that the gradual replacement of coal-fired power by more efficient gas-fired power is not progressing and, as a result, there is no significant cut in carbon dioxide emissions.

Prices charged for electricity not produced by wind farms have been rising because government support for the electricity industry has been directed to the wind farms. Expensive electricity production has driven industries abroad which has resulted in a loss of income and jobs. By 2020 it is estimated that small businesses will be paying 77% more per unit for electricity. The poor and the elderly have been hit hardest by high electricity bills. Some say that the support of wind farms has caused the destruction of landscapes.

Source: The Times, 9 November 2015

Sustainable agriculture

In Africa, industrial methods of agriculture deplete the soil, pollute water tables and fail to benefit small-scale farmers. Agro-ecological methods – aimed at producing food without damaging natural resources – are by contrast more sustainable for the farmers and more nutritious for consumers. Advocates say these methods are profitable for small-scale farmers and more productive with high yields and cheap inputs. They say ‘we need to develop local markets, create local diversity and increase the capacity of local economies’. Using them could have a huge effect on the 70% of Africans that rely on agriculture for their livelihoods. This was endorsed by a conference in Mali in 2015. Even large commercial farms are starting to adopt the agro-ecological methods.

Currently, six companies supply 60% of the world’s commercial seed market and 11 companies supply 98% of the world’s pesticide market. Supporters of agro-ecological methods claim that these huge multinationals can easily capture markets through their combined financial and political power and can restrict farmers’ choice of what inputs to buy and which markets to supply. Those representing small farmers say that these markets are not competitive.

Large corporations deny this accusation that they restrict markets and exploit small-scale farmers. They say farmers have to make a new choice each year so whenever input suppliers have a new product they need to offer something that is reliable so that the customers will come back and buy more.

Source: African Business, August/September 2015